Cross taxes off the list of major burdens for Northeast Ohio small businesses

Accounting Today notes that Cincinnati, Baltimore and Cleveland ranked highest among large cities in their tax favorability for businesses, according to a new study by KPMG. New Orleans and Baton Rouge, La., led the way among smaller cities.

“Of the 55 large international cities highlighted in the study, Cincinnati, Baltimore and Cleveland all ranked in the top 20 — 16th, 17th and 18th, respectively,” according to the story. “Among the 14 countries in the study, the U.S. ranked eighth in terms of favorability of its overall tax structure for business.”

For its “2012 Competitive Alternatives: Focus on Tax” study, KPMG compared the total tax burden that may be faced by companies in 113 cities across 14 countries in terms of corporate income taxes, capital taxes, sales taxes, property taxes, miscellaneous local business taxes and statutory labor costs.

“While we've come to expect our large cities to compete internationally to provide competitive tax incentives for business, it's heartening to see a number of locations in the mid- and small-sized city categories ranking high in the overall U.S. study,” said KPMG principal Hartley Powell in a statement. “With three Louisiana cities faring so well and the high rankings among the large cities for Ohio's Cincinnati and Cleveland, it's clear that some states are working particularly hard to make their cities more competitive in terms of corporate tax.”

According to the study, Cincinnati had a total tax index of 80.8, representing tax costs 19.2% below the U.S. baseline of 100.0. Baltimore and Cleveland followed at 83.3 and 85.2, respectively.

Accounting Today notes that for manufacturing operations, where property taxes and taxes on equipment and capital are of greater importance, the three large U.S. cities providing the most cost-effective tax structures for business were Cincinnati (76.6), Baltimore (78.1) and Cleveland (82.2).

A little more knowledge is a good thing

Entrepreneurship programs nationwide typically focus on the nuts and bolts of starting a business — writing a business plan, raising money, etc. — but they “would do well to expose their students to more microeconomics,” according to this Businessweek.com column by Scott Shane of Case Western Reserve University.

“Before you recoil in horror at the notion of inflicting more of the dismal science on business students thinking of starting their own companies, please hear me out,” writes Prof. Shane, the A. Malachi Mixon III Professor of Entrepreneurial Studies at CWRU. “Many company founders make mistakes that they could have avoided had they known more economics.”

For instance, he writes, entrepreneurship students often ask if they should start a business in a particular industry.

“If an industry is profitable, many people will enter the industry, lured in by the prospect of high profits,” according to Prof. Shane. “But all that entry will lead to competition that erodes profits. For an industry to remain profitable, the businesses in it must be able to bar others from entering. Thus, basic microeconomics makes it clear that entrepreneurs should pick industries with significant barriers to entry even though it's much easier to start a business in industries with few of these obstacles.”

Stronger knowledge of economics also helps them make better decisions on pricing and evaluating losses, among other factors.

“Economics often seems abstract and irrelevant to business students, in part because those of us teaching it don't do enough to emphasize its practical applications,” he concludes. “But my experience both teaching entrepreneurship and investing in startups has convinced me that having a solid grasp of microeconomics helps entrepreneurs avoid making poor decisions that sink young companies.”

Forbes.com reports that a new poll from the National Association of Manufacturers says 55% of small business owners and manufacturers say they wouldn't start a new company today.

The president of NAM, Jay Timmons, who commissioned the poll along with the National Federation of Independent Businesses, said in a statement, “There is far too much uncertainty, too many burdensome regulations and too few policymakers willing to put aside their egos and fulfill their responsibilities to the American people. To fix this problem, we need immediate action on pro-growth tax and regulatory policies that put manufacturers in the United States in a position to compete and succeed in an ever-more competitive global economy.”

Among other findings:

69% percent of small business owners and manufacturers say current federal regulatory policies have hurt American small businesses and manufacturers.

54% say other countries like China and India are more supportive of their small businesses and manufacturers than the United States.